As an update to Ryan’s article, Proposed Tax Changes for California, the proposal to provide all Californians healthcare from a government run program has been taken off the table by its sponsor. The bill, AB 1400, would have cost taxpayers an estimated $365.5 billion per year. AB 1400 did not include the fund-making mechanisms to implement the program. ACA 11 was the fund provider piece of legislation that called for 1) a gross receipts tax on businesses, 2) increased payroll taxes on employees and employers, and 3) a personal income tax increase, which still fell short by $165.5 billion to pay for the single-payor system. Therefore, the proposed tax increases related to the single-payor system will not be considered.
In related news, in his budget address, Governor Newsom promised to reinstate net operating loss (NOL) deductions and the use of business tax credits. Legislation introduced on January 26, 2022, by Assembly Member Kevin Kiley, would reinstate California’s NOL provisions for years beginning on or after January 1, 2021. The bill would also continue to extend for one year NOLs incurred in taxable years beginning on or after January 1, 2021 and before January 1, 2022.
Another bill was introduced by the Committee on Budget, AB 87, on February 2, 2022, which would not only restore the NOL deductions but would also eliminate the moratorium on allowing more than $5,000,000 in credits to offset net taxable income. AB 87 is now in print and will allow taxpayers to offset net taxable income with credits in excess of $5,000,000 for years beginning on or after January 1, 2022.
Ryan’s state income tax experts will continue to monitor these developments.
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